NEW YORK, July 15 (Reuters) - Wall Street was set to rise on Friday after strong earnings from Google and Citigroup helped lift some of the angst about Europe’s debt crisis and and stalled U.S. budget talks that have overhung the market.

But the second unexpected contraction in a gauge of manufacturing in New York State underlined the risks an economic slowdown posed to investors.

Google Inc’s (GOOG.O) earnings beat forecasts, sending its shares up 13 percent. Citigroup Inc posted higher net income in the second quarter, helped by falling credit losses, which helped lift the stock more than 3 percent before the opening bell.

“The market has been focusing on the debt problems in broad, but we have been getting good earnings results from big names,” said Peter Cardillo, chief market economist at Avalon Partners in New York. “If we get some resolution on the debt ceiling, the market is going to focus more on the earnings.”

Despite Friday’s lift, Wall Street was heading for its worst week in nearly a year as global risks keep markets volatile and overshadow the start of U.S. corporate earnings season.

Europe’s sovereign debt crisis, stalled budget talks in Washington and an uncertain economic backdrop have sent Wall Street on a roller coaster ride since the spring.

The S&P 500 is down 2.6 percent so far this week, heading for its worst week since the middle of August, 2010. Two weeks ago Wall Street posted its best week in two years.

A health check of European banks is expected to show later on Friday that as many as 15 lenders need more capital to withstand a prolonged recession, with criticism growing that the tests do not encompass the impact of a Greek default. [ID:nL6E7IF094]

Ratings agency Standard & Poor’s warned there was a 1-in-2 chance it could cut the United States’ triple-A rating if a deal to raise the government debt ceiling is not reached soon. [ID:nL3E7IF0JL]

President Barack Obama suspended U.S. budget negotiations for the day to give congressional leaders a chance to come up with a plan of action on how to unblock talks meant to cut deficits and avert a debt default. [ID:nN1E76D26R]

In other economic news, U.S. consumer prices fell slightly more than expected in June to post their biggest drop in a year on weak gasoline costs, government data showed, pointing to a cooling in commodity-driven inflation pressures. [ID:nN1E76E03D] (Reporting by Edward Krudy; Additional reporting by Angela Moon; Editing by Kenneth Barry)